Despite the enormous amount of negative publicity surrounding the finances of the London 2012 Olympic Games, International Marketing Reports (IMR) analysis has found that the cost of the Games is likely to be less than forecast and the benefits to the British economy could be significant.
The current estimated cost of staging the Games is in the region of £7.2 billion. The much discussed £9 billion includes a contingency figure which now appears less likely to be required.
"The actual cost of constructing the Olympic facilities in London is significantly short of this figure," says Simon Rines, editorial director at IMR.
"The stadia and other venue costs are in the region of £1.1 billion - indeed London is utilising more existing venues such as Wimbledon, Wembley and the O2 Arena, than most host cities have in the past. The majority of construction work is complete and the main stadium is ahead of schedule and under budget.
"The big costs on the Olympic site have been for site preparation and transport infrastructure. This has cost approximately £2 billion. The Olympic Village will cost in the region of £500m, however it will be re-usable, although will probably never re-coup the total outlay."
Most of the new facilities will also be used after the Games - and it should be borne in mind that London has been particularly poorly served for sporting facilities other than for football, cricket, rugby and tennis. The new swimming, cycling and athletics venues will now help the City to attract international events and the associated revenues for decades to come with an estimated economic benefit of at least £50 million per year.
The main stadium will be leased by West Ham United and will eventually recoup part of the construction cost as well as guarantee increased employment in the area.
Other big costs include security - approximately £900 million in total. Given that much of this will be taken up in wage payments, a significant chunk will end up back in the pocket of the UK Treasury as tax receipts. Indeed, many of the other costs have a large tax element included as there is a VAT payment running to tens of millions of pounds due and all those working on the infrastructure and running of the Games will be contributing taxes to the British economy. IMR estimates that a minimum of £500 million of the Games costs will end up back in the hands of the Treasury.
The revenue from LOCOG sponsors and ticketing is roughly £1 billion, while the grant from the International Olympic Committee, which comprises revenue from TV rights and international sponsors, adds roughly another £1 billion. These will pay for the actual running of the Games.
"Although at this point no exact figures can be projected, it is clear that the true cost to the British economy as a whole of staging the Games is likely to be between £4-5 billion," says Rines.
"This sum will go a long way towards regenerating an area of London that has needed such investment for decades and would have cost £2-3 billion pounds to achieve. It's arguable that the regeneration is actually being subsidised by the private sector with a large chunk coming from inward investment through IOC grants and sponsorship from international corporations. They will not pay directly for the infrastructure, but they are in effect an economic catalyst as they will subsidise the Games."
The economic analysis also needs to consider the cost of retaining the Olympic site as a derelict 'brown field' area. Those costs include huge sums spent on unemployment and social security benefits, policing, health and environmental management.
IMR estimates that the cost to the British economy of leaving the Olympic site derelict would be in the region of £200-£400 million per year. The significant investment that will create jobs, provide modern housing and transport and attract new business should generate between £100-200 million per annum - a net gain of at least £300 million per year.
Apart from providing the Britain with sporting facilities that it needed and regenerating a huge swathe of one of the world's great cities and creating thousands of jobs, the Games offers other economic benefits, although tourism and sports participation, highlighted by the UK Government are not considered as significant.
"Analysis of previous major sports events has found the impact on these areas is unpredictable," says Rines.
"Barcelona gained tourism revenues, whereas Athens, Beijing and Sydney appear to have seen a fall. There is as yet no proof that hosting major sports events has any impact on national sports participation or health, although most hosts have failed to devise adequate programmes to achieve such objectives."
The key macro-economic benefits to the Britain, therefore, concern its image abroad and the positive effect on the psyche of the nation. In terms of image, the eyes of the world will be focussed on the country in the build up to, and duration of, the Games.
Already the message is positive - London has not been beset with the delays and construction problems that blighted Montreal, Athens and more recently Delhi (for the Commonwealth Games). Indeed all the IOC reports have focussed on how well the country has managed the massive task.
It gives Britain a chance to demonstrate that it is a modern, efficient and multi-cultural nation, able to handle logistical, social and engineering problems.
This presents a massive opportunity for inward investment and exports of British goods and services. The value to the economy of such an image is not possible to quantify. But with the Olympic Park in view of the skyscrapers containing London's trading floors, which turn over more than $1.9 trillion per day in foreign currency alone, it is clear that even a minor boost to business is economically very significant and could run to billions of pounds.
